"Shifting wealth" – a process that started in the 1990s and took off in the 2000s – has led to a completely new geography of growth driven by the economic rise of large developing countries, in particular China and India. The resulting re-configuration of the global economy will shape the political, economic and social agendas of international development as those of the converging and poor countries for the years to come.

This report analyses the impact of "Shifting wealth" on social cohesion, largely focusing on high-growth converging countries. A "cohesive" society works towards the well-being of all its members, creates a sense of belonging and fights against the marginalization within and between different groups of societies. The question this report asks is how does the structural transformation in converging economies affect their "social fabric", their sense of belonging or put generally their ability to peacefully manage collective action problems.

Recent events in well performing countries in the Arab world but also beyond such as in Thailand, China and India seem to suggest that economic growth, rising fiscal resources and improvements in education are not sufficient to create cohesion; governments need to address social deficits and actively promote social cohesion if long-term development is to be sustainable.

Labour market outcomes and social protection are important determinants of social cohesion. Shifting wealth has altered the challenges for employment and social protection. Although it has created opportunities, it has also led to disruption in the form of changing functional distributions of income, tense labour relations, and changes in the risks faced by citizens. Looking at labour market and social protection challenges from the point of view of social cohesion calls for examining labour market institutions and social protection systems not only in terms of efficiency, but also their ability to prevent or mitigate duality and segmentation. Labour market institutions need to evolve to better accommodate the transformation in labour markets if they are to fulfil their price-setting and allocative roles and so produce fair outcomes that are achieved with minimal strife. Social protection systems that are segmented into social assistance for the poor and social insurance for formal workers risk leaving a missing middle among vulnerable but non-poor informal workers. A holistic approach that considers social protection systems in their entirety as well as their interactions with labour market outcomes helps identify such gaps and leads to different choices in programme design.